Slide 1
Planning Process for Economic Growth in Pakistan1
Dr. Vaqar AhmedSustainable Development Policy Center
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To increase per capita and national incomeHigher level of employmentPrice stabilityReduction of inequalities in income distributionTo remove BOP difficultiesReducing regional disparitiesSelf-sufficiency in foodRedressing imbalances in the economyIncrease in savingsReducing population growthReducing poverty levelsProvision of social servicesLong term economic growth2Objectives of Economic Planning
3Planning Myths
4Myth 1: Planning is useless because policies lack consistency
5Myth 2: LDCs including Pakistan have not completed the tenure of their economic policies
6Myth 2: LDCs including Pakistan have not completed the tenure of their economic policies
The discontinuity was not in policies but projects
7Myth 3: Pakistan Vs. South Korea Model Myth
Aid ReceivedModel Focus8Myth 3: Pakistan Vs. South Korea Model
Financing for GrowthDebt FundingEquity funding
Public Sector Funding :PSDPAssistanceEquity9Planning for Growth
Can growth & distribution be achieved simultaneously?
Is growth necessary for distribution?
Is it economic growth that leads to reduction in poverty or the process of distribution?
Case of Trade Liberalization ?10Planning for Income Distribution
Data CollectionAnalysisPlanning & PrioritizingImplementationMonitoring
11Policy Planning & Implementation Stages
12Planning Process and Machinery in Pakistan
Consultation with:Federal Ministries / Provincial GovernmentsDonors Civil SocietyFormulation of National PlanAnnual PlanFive Year PlanRolling PlanPerspective Plan (15-25 Years)Project ManagementApproval of Development ProjectsMonitoring & Evaluation of ProjectsAssociation with EAD in matters of Foreign Assistance13Functions of Planning Commission
Plan Preparation Process14Planning CommissionPreparation of approach paperFormulation of technical working groups in all sectorsPreparation of sectoral chapters by working groupsConsultations with all Federal Ministries for inputConsultations with all Provincial Govts. for inputSent to all Fed. Ministries and Dev. Partners for comments and inputSent to all Provincial Govts. for comments and inputFinance Division(Resource Availability)Economic Affairs Division(Foreign aid availability)Finalization of draft plan by PC and its presentation before President/Prime MinisterSubmission to National Economic Council (NEC)Circulation of approved plan to all Provincial Govts. And Federal Ministries for implementationTransformation of plan into viable projects/programmesDraft Five Year Plan
15Plan Periods in PakistanPlanPeriod1.Colombo Plan (Six Year Plan)1951-572.1st Five year Plan1955-603.2nd Five year Plan1960-654.3rd Five year Plan1965-705.4th Five year Plan1970-756.5th Five year Plan1978-837.6th Five year Plan1983-888.7th Five year Plan1988-939.8th Five year Plan1993-9810.9th Five year Plan1998-200311.10 Year Perspective Development Plan2001-1112.Medium Term Development Framework (MTDF)2005-1013.Vision 203014.10th Five year Plan (drafted twice)2010-1515.Framework for Economic Growth2011
PoliciesPlansPerspective Plan10-25 YearsMid Term Plan04-07 YearsRolling Plan03 YearsAnnual Plan01 YearTransformation of plans into projects/programmesPolicies Plan Projects16Main Instruments of National Planning
17Does Public Investment Crowd-in Private Investment?
No strong relationship between PSDP and growth (Ghani and Din 2006)
PSDP may kick start growth but not sufficient to sustain growth (Pasha 2011)
PSDP contributes only 14% in TFP growth (Masood & Hyder 2007)
National Economic CouncilPlanning Document (Annual / Medium Term Plan)Assistance and partnership strategies with donors
Line Ministries / Public Sector CorporationsBased on their sectoral strategies / work plans
Public Representatives/NGOs/Pressure GroupsPolicy Debates18How Projects are Identified in Pakistan?
HistoryIntroduced in September 1952Revised by Group of Experts 1995 including World Bank.14 Forms of Various Sectoral Projects
PresentOnly 3 sectoral PC-I Performa (Infrastructure, Social Sector and Production Sector)19Project Preparation PC I Performa
Need for Feasibility StudiesProjects costing Rs. 300 million and above
Financing the Cost of Feasibility StudiesProvision under PSDPProposal to be submitted in the form of PC II Performa
Highly Technical ProjectsRequest donor for Technical Assistance Grant20Project Preparation PC II Performa
PC III, PC IV, PC VPC-III: Designed to furnish information on the programme of on-going projects on quarterly basisAny Changes in Scope of DesignAny RevisionsAny Changes in Management of ProjectPC-IV: Project History (Physical Completion of Project)Accounts Closed/amount unaccountedEmployment generated by the projectSuggestions for future planningName of the operating agency21Project Approval & Appraisal
PC III, PC IV, PC V
PC-V form is to be furnished on annual basis for a period of five years by operating agencyReview of costsReview of financial resultsArrangements for maintenance of projectDifficulties experienced in operation, marketing etc. Repercussion of schemeGeneral observation of Federal Ministry
22Project Approval & Appraisal
Approving Authority
Departmental Development Working Party (DDWP) Up to Rs. 60 millionCentral Development Working Party (CDWP) Up to Rs. 1000 millionExecutive Committee of National Economic Council (ECNEC) More than Rs. 1000 millionProvincial Development Working Party (PDWP) Up to Rs. _____ millionCorporations and Autonomous Bodies No Limit23Project Approval & Appraisal
24Sectoral Distribution of PSDP 2011-12SectorRs. Billion% ShareInfrastructure16557Social Sectors12242Production31Total290100ERRA10-Total Federal300
Others include: Environment, Agriculture and Livestock, Industries and Commerce, Minerals24
25Why is PSDP Falling?
Share of PSDP in Overall ExpenditureSize of PSDP [Federal + Provincial]Current Expenditure Crowding out Development Expenditure
This psdp does not include self-financed public investment by PSEs25
26Reasons for Contraction in PSDP SizeReduction in PSDP has disrupted development process
27How much PSDP reaches the Poor?Estimate in Rs. HighLowOverhead Costs of Projects Execution8.18.1Contingency & Miscellaneous (Potential Savings)5.02.5Duties on Machinery and Equipment1.41.4Commissions on Machinery and Equipment1.3-Taxes and IDC on Civil Works11.611.6Corruption Payments 4.6-Transfer Payments for Land Acquisition, etc.5.55.5Total Leakage37.529.1Amount for Service Provision62.570.9Source: P&D Division
For every Rs. 100 allocated, Rs. 38 does not reach beneficiaries
Implementation issues: difficulties in land acquisition, appointment of contractors, procurement etc. 27
28Issues in Feasibility, Appraisal and Approval Process
Implementation issues: difficulties in land acquisition, appointment of contractors, procurement etc. 28
29Most Critical Issues
Masood & Hyder 2007: Contribution to TFP growth %: Cotton growth (12%), manufactured exports (32%), human capital index (27%), development expenditure (14%), credit to private sector (8%), Others (7%). 29
30Rationalization of PSDP Portfolio
31Escalation of Cost between 2004-11Escalation is due to design change, upscaling, inflation effectProject% Cost EscalationIslamabad-Peshawar Motorway47Lowari Tunnel193Widening & Improvement of N-8549Rehabilitation of Karakoram Highway67National Program for Family Planning & Primary Health Care415Expanded Programme for immunization392Raising the Mangla Dam (including resettlement)62Lower Indus Right Bank Irrigation & Drainage235Right Bank Out fall Drain from Sehwan to Sea109
Implementation issues: difficulties in delay in release of funds, lack of capacity, land acquisition, appointment of contractors, procurement etc. 31
32Criteria for Slashing PSDP
Implementation issues: difficulties in land acquisition, appointment of contractors, procurement etc. 32
33Analysis of Projects in PSDP
Implementation issues: difficulties in land acquisition, appointment of contractors, procurement etc. 33
34Sectoral Priorities in Federal PSDP (%)Physical Infrastructure 32.8%Social Development 18.9%Productive Activities 4.6%Special Areas 13.8%Special Programmes 15.3%Other 14.6%
35Share of Infrastructure by Type (%)PSDP Allocation for Infrastructure: 2003 Rs. 90 billion2008 Rs. 335 billion2012 Rs. 290 billionPakistan over-invested in Roads (Pasha 2011)%
36Cost Components of Projects 2010-11Largest share goes to civil works, machinery procurement, and land acquisition and resettlementMain Cost ComponentsDelivery CostTotalLand & ResettlementCivil WorksMachinery EquipmentSalary & AdminVehiclesUtilitiesContingency & Misc220235055826817.522582.540185.5%58.4%14%7.2%0.4%0.5%14%100%78%22%100%Source: Planning and Development Division
Rs. billion
37Project Monitoring Methodology
38How Many Projects are Monitored?YearPSDP Allocation(BN Rs.)Number of ProjectsNo. of Min / Div Electronically Connected with(PMES)CumulativePSDP (Nos)Monitoring(Targets)Monitored(Achievement)Ex-Post Evaluated2005-062041530170156--2007-0833521197207662042008-09219189458758731112009-10300224361161826222010-11*280 (180)~18466545781228(pre-devolution scenario)*Upto end-June 2011, ~ Rationalized, @ Target (33 Ministries)
Implementation issues: difficulties in land acquisition, appointment of contractors, procurement etc. 38
39Issues in Project Implementation#Issues / Problems2008-092009-102010-11*1Management Capacity252 (43%) 212 (34%) 124 (23%) 2Inadequate Releases 179 (30%) 183 (30%) 216 (40%) 3Delay in Civil Works44 (8%) 68 (11%) 75 (14%) 4 Consultant Related Issues 7 (1%) 20 (3%) 22 (4%) 5 Lack of Coordination Between Fed/Prov. Govt.22 (4%) 9 (2%) 22 (4%) 6 Delay in Procurement0 (0%) 7 (1%) 16 (3%) 7 Others (Security and Sector Specific Issues etc.)58 (10%) 58 (9%) 54 (10%) 8 Projects having no major issue/problem25 (4%) 61 (10%) 11 (2%) TOTAL587618 539
Implementation issues: difficulties in land acquisition, appointment of contractors, procurement etc. 39
40Analysis of Aid by Division
Implementation issues: difficulties in land acquisition, appointment of contractors, procurement etc. 40
41Top 10 Foreign Aided Projects 2010-11Sr. DivisionSchemeAllocation (Rs. Million)NoAidRupee Total 1Atomic EnergyChashma Power Project (C3 and C4)7,5102,81610,3412Atomic EnergyChashma Nuclear Power Project C-II2,2125542,7663NHAFaisalabad Khanewal Expressway 1,6462471,8934RailwaysProcurement/Manufacture of 75 New D.E. Locos1,3598002,1595HealthHealth System Strengthening and Policy Programme1,340701,4106HealthNational Maternal, Neo Natal and Child Health Programme1,2351,0462,2817Kashmir Affairs43.5 Jagan Hydro Power Project1,23501,2358RailwaysReplacement of Khanewal Section1,2006171,8179WAPDANeelum Jhelum Hydropower Project1,10313,59714,70010States & FrontierFATA Special Programme1,0967,1358,231Total (Top 10 Projects)* 19,93626,88246,833Total PSDP 37,584242,415280,000% Share Top 10 Projects 53%
Implementation issues: difficulties in land acquisition, appointment of contractors, procurement etc. 41
427th NFC Award & 18th Amendment
Implementation issues: difficulties in land acquisition, appointment of contractors, procurement etc. 42
43Share of Federal & Provinces in PSDPDevelopment Planning Shifting to Provinces
Federal govt will continue to fund higher education & provide for vertical programs of health and population
What will be the mechanism of funding of projects which are neither location specific nor vertical program? 44Federal PSDP 2010-11 Transferred to ProvincesThrow forward(July 1, 2010)(Rs Billion)Allocation for 2010-11(Rs Billion)Federal1,117208Transferred to Provinces34457Total1,461265
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45Examples of Projects with Unclear Responsibility for FundingSectorProjectEducationEstablishment & Operation of Basic Education Community Schools in the Country EnvironmentConversion and Rehabilitation of Indus Delta Mangroves for Sustainable ManagementEnvironmentEstablishment of Environmental Monitoring System in PakistanHealthNational Plan for Disease SurveillanceHealthHealth System Strengthening and Policy ProgrammeLGRDModel Village Development in Pakistan Food and AgricultureNational Program for Improvement of Watercourses in PakistanFood and AgricultureWater Conservation & Productivity Enhancement through High Efficiency Irrigation SystemFood and AgricultureNational Project for Enhancing Existing Capacity of Grain Storage Special InitiativesClean Drinking Water for All
Implementation issues: difficulties in land acquisition, appointment of contractors, procurement etc. 45
46Reforms Agenda for PSDP
Implementation issues: difficulties in land acquisition, appointment of contractors, procurement etc. 46
47Results Based Management
Key Performance Indicators Strong M & E
Implementation issues: difficulties in land acquisition, appointment of contractors, procurement etc. 47
48Portfolio, Program, and Project Management
Integrated spatial planning, investment programming and portfolio management along with E-governance and M &E48
49How Provinces should Rationalize Throwforward?
Implementation issues: difficulties in land acquisition, appointment of contractors, procurement etc. 49
50Minimizing the Leakages
Implementation issues: difficulties in land acquisition, appointment of contractors, procurement etc. 50
51Capacity Building Projects
Implementation issues: difficulties in land acquisition, appointment of contractors, procurement etc. 51
Strong financial and technical appraisal should be put in place may be outsource this
Social analysis should reflect beneficiary population, dislocation, resettlement, livelihoods
Economic analysis should estimate EIRR, B/C ratio, NPV and domestic resource cost
Risk analysis should include time delays, cost variations, design and content modifications52Improving Feasibility, Appraisal and Approval Processes
Implementation issues: difficulties in land acquisition, appointment of contractors, procurement etc. 52
Rationalize Projects further and maintain priority-based completionReduce throw forward through financing modes such as: Public private partnershipsBuilt to operate & transferBuilt to operate & ownDiscourage brick and mortar projectsAssure full release of PSDP budget without cutsCarefully re-estimate cash flows and benefits53Way Forward
www.sdpi.org [email protected] 54Thank You
Chronology of Planning MachineryDevelopment Board established in 1948 in the EADPlanning Board set up in 1953. First 5 year plan prepared for 1955-60National Planning Board established in 1957Planning Commission setup under the Chairmanship of President in 1959Second five year plan prepared for 1960-65 followed by the third five year plan for 1965-70Fourth Five Year Plan (1970-75) prepared but remained dormant due to separation of East Pakistan1970-77 non plan period: Development on basis of Annual Plans 8.Fifth Five Year Plan 1978-83 55
Chronology of Planning Machinery9.Sixth Five Year Plan 1983-88 10.Seventh Five Year Plan 1988-93 Eighth Five Year Plan 1993-98 Ninth Five Year Plan (halted due to changed in government)13. 10 Years Perspective Development Plan 2001-1114.MTDF 2005-10 July, 2005.15.Planning Commission restructured on 20 April 2006 with P.M. as Chairman.16.Vision 2030 launched in August, 200756
Reactive Past oriented
Inactive Present oriented
Preactive Predicting the future
Proactive Create the future
57Approaches to Planning
Realistic goals of the planAppropriate policies and instrumentsAdequate informationRational institutionsSuitable administrative and technical apparatusPublic cooperation58Conditions of Successful Planning
Identification and FormulationAppraisal and ApprovalImplementationCompletion and ClosureEx-post Evaluation
59Project Management Lifecycle
